Quick 20 Tips for Mortgage while on H1b.
We requested him to answer some of the basic questions a consultant on h1b would have in context of buying a House.
Can I buy house while on H-1B?
What are the eligible criteria to obtain a mortgage loan?
A: It is recommended that you have a credit score of 720+ to get a lowest interest rate, your pay stubs and W-2s would determine how much can you borrow.
What are the most common loan programs offered by Mortgage companies? and how much of the down payment is needed? What is best way to do it?
A: There are various loan distributions offered by various mortgage lenders:
i. 80/20 80% loan amount and 20% down payment
ii. 80/10/10 80% loan, 10% second loan, and 10% down payment
iii. 90/10 90% loan and 10% down payment (rate is higher for such loans)
iv. 100/0 100% loan, which bears higher rate.
It is suggested to take 80/20 loan if you can put up 20% down payment; otherwise 80/10/10 is better option.
I have been in the US for last two years; I plan to buy a small condo for Investment purpose. Is it a good idea?
A: I have heard many of my American friends suggesting me to invest in real-estate. You need to do good bit of research before proceeding with the purchase.
I. Check out the Rent vs. Own factor at http://realestate.yahoo.com/calculators/rent_vs_own.html
II. Learn about various mortgage loans; calculate your payments etc, at Yahoo! mortgage center: http://finance.yahoo.com/loan/mortgage
III. Remember to research the real-estate price trends over last 10-15 years in your location of purchase.
After buy house, does it take too much to maintain it?
A: It is advised that you do thorough inspection of the house before the purchase. You could get each damaged/worn out material fixed by the seller before closing of the loan.
If everything went well and smooth, an individual house may not have a lot of maintenance costs but a condo/townhouse will have association fees due every month.
How is USA real estate market in terms of investing?
A: Recent trends show that real estate sales slowed down and prices dropped lowest in 2006. You may not have so much profit as people had over last 3-4 years; but hey its never too late.
Does it take too much of paper work to go for mortgage house?
A: Yes. You should consult a realtor who will take commission from seller but will guide you in the process of the purchase. You will need to provide necessary papers to apply for mortgage loan and will sign numerous papers during the closing of the loan.
You will need to pay various people or entities, i.e., Surveyor, Assessor, Mortgage application fee, Title search and insurance, and Inspector etc for their services. These people or entities will provide certified letters which will be verified at the time of closing.
I am still in the early stage of my Green Card processing, and as you know it takes lot of time nowadays to get through it, do you think it makes sense to buy a house?
A: First and foremost, Will you be living in the same area until at least next few years? Second, do you feel you are paying a lot on rent?
You need to do some research as answered in Q.4 and come up with a best proposition for you and your family.
Can I buy a house, give it on rent and continue to make money out of it?
What happens If I buy house and for some reasons I have to go back to India?
A: You may have to sell it before you leave or find a confidant who can lease it or sell it after you leave.
I make 80k, and am a bachelor, how much money do I have to invest in beginning and then monthly to buy a House?
A: See answers to Q.3 and Q.4 and evaluate the reasons to invest. Once you make up your mind, other factors are same whether you are single or married.
Are there any cities at this point of time, good for real estate investment?
A: Yes. If you live around cities like Raleigh, NC, Phoenix, AZ and some others. It is worth investing over next few years.
Which is better choice of investment, buy house in India or in USA?
A: I heard real-estate boom inflated properties in Indian major cities, and some upcoming towns like Pune, Noida, and Gurgaon. If such a pattern continues, my guess is its better to invest in India than in the US.
Does family structure come into picture in cost and loan process; i.e., does it help to buy house as family person rather than as bachelor, any tax or cost benefits?
A: Yes. Your interest payments over the first 5-7 years count towards your non-taxable income. It is like the lower the net income, the lower are the taxes; interest amount and dependent deductions will bring down your net salary to a certain level.
Does paying mortgage help me to save money in taxes?
A: See answer to Q.14
Is real estate investment better than stock investment in present market conditions?
A: Do your research and choose the right investment strategy. I have had some friends who made 20% profit in stock market in 2006 and also people who gained and lost in real-estate.
If I work as consultant, what points I should be careful of before buying house (ex; avoid re-location etc.)
A: Buying a house is a major investment and you are liable for a big loan amount. So, buy a house only if you are sure you will be around there for a while.
I always see people buying houses only after they have reached at some stage in green Card process. Any specific reasons?
A: It is good to observe the people and avoid the mistakes other made, but in reality you should decide what is best for you and your family.
Can I partner with 2 other friends and buy a house, this way I will share all profits if I make any?
A: Yes. If you trust your friends well enough to pursue a big investment, remember it may become your liability if your partners gave up on the loan/property.
If I plan to partner with one friend and buy house, what kind of additional paper I should do?
A: I am not aware of any additional paperwork needed at this time.